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Size Doesn’t Matter in Publishing

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

The announcement of a proposed merger between Random House and Penguin publishers has generated quite a stir, because it would create the largest publisher in America. Many people believe that this merger is meant to give the two publishers increased leverage to negotiate book prices and financial terms with Amazon. However, in the publishing industry, size doesn’t matter.

I can appreciate a publisher’s desire to minimize Amazon’s influence. But, there is a fundamental flaw with trying to compete against Amazon using a merger strategy. No matter how big a publisher gets, Amazon still controls direct access to the consumer. And, the one who goes direct to the consumer ultimately wins. All of the Big Six publishers could merge into one giant entity, but that wouldn’t prevent Amazon from maintaining leverage.

For example, Amazon actually knows the consumer. They know who purchases their books, where they live, what they’ve read in the past, and what they’re likely to read next. Heck, using its Kindle platform, Amazon can even tell who’s finished a book versus who’s still halfway through a story. In contrast, publishers don’t know any of this critical information.

In order for publishers to compete against Amazon, merging into a large conglomerate won’t work. Instead, publishers must learn to beat Amazon at its own game…master direct-to-consumer marketing. Notice I didn’t say direct-to-consumer “selling.” Selling books directly to readers is a different situation.

Publishers can promote books according to the results they offer, and build their own database of consumer names, reading history, and book preferences. Marketing via a direct-to-consumer approach means offering free resources, exclusive content, unique discounts, and special access to favorite authors. Do things that the retailer can’t do. Give consumers a reason to enter into a direct relationship with the publisher that can be fostered for the long-term. Amazon is laser-focused on connecting with the consumer, and that’s why they’re controlling the industry.

There is nothing preventing publishers from marketing direct-to-consumer…other than their misplaced focus on creating headlines through big mergers. In publishing, though (along with most important areas of life) size doesn’t really matter.

About Rob Eagar

Rob Eagar is the founder of WildFire Marketing, a consulting practice that helps authors and publishers sell more books and spread their message like wildfire. He has consulted with numerous publishers and worked with over 400 authors, including several New York Times bestsellers. Rob is the author of Sell Your Book Like Wildfire, which is considered the new bible of book marketing. For more information, visit: www.startawildfire.com.

4 thoughts on “Size Doesn’t Matter in Publishing”

I actually buy the argument that merging is not that much about confronting Amazon, but rather surviving the shifts in the industry. Every industry goes through phases of contraction and expansion. Traditional publishing is entering a kind of shakeout just as e-publishing is entering its startup phase. This was coming for the industry, even without Amazon. As soon it became easy to reach a mass audience without printing a lot of physical media it was only a matter of time. Amazon wasn’t the first to deliver a viable e-reader, but they delivered the first one with mass appeal. 25% of all books are now delivered as electronic media – anytime a quarter of product changes its fundamental nature your industry is in for seismic change. For traditional publishers to thrive they have to bulk up. #1: Content is king. The more titles a publisher commands, the better – regardless of distribution. #2: Reduce costs. As the demand for hardback and paperback books lessens (though, will remain the majority of books sales for at least the next decade) being able to shed a lot of fixed costs, but still deliver the amount of physical books demanded will be a distinct advantage.

However, I would argue with your point that all the leverage lies with Amazon. If all the major publishers merged they would be able to muscle Amazon, though I very much doubt the DOJ would allow that. Sales freezes don’t just hurt the publishers, just like cable-lockouts don’t just hurt the content providers. Just look how they rammed agency pricing down Amazon’s throat. If Amazon stopped selling all the books from all the publishers you would see a lot of people buying Nooks and iPads just to read. Somewhere between all Big 6 merging and a few strategic mergers exists a legal way to at least have a better position at the table with Amazon. I would be surprised, though, if the executives decided to make such a large move just to have a somewhat improved negotiating position with one large retailer.

A company the size of a Penguin/Random House merger will be able to sell their books directly to the consumers without Amazon’s help. They would be publishing 20% of all the books published. Then if they’re willing to take on other publisher’s books….you have another effective competitor to Amazon. And there are other etailers popping up now….Bookish, if it launches and Zolabooks. Competition is good.

In the distribution of print products (still an estimated 70% of the book market in the US), size certainly does matter. The cash-flow and overhead burden in the sales and supply chain infrastructure threatens to strangle major publishers. The proposed merger between Random House and Penguin gives them flexibility for how best to scale down the investment in the print supply chain, as the eBook market grows and develops.

I do agree with you that “there is a fundamental flaw with trying to compete against Amazon using a merger strategy. No matter how big a publisher gets, Amazon still controls direct access to the consumer. And, the one who goes direct to the consumer ultimately wins.” After that, you loose me again. If “competing against Amazon . . . won’t work” what are you really suggesting when you say “publishers must learn to beat Amazon at its own game…master direct-to-consumer marketing.” Marketing direct-to-consumer is Amazon’s key strengths. Their marketing assets: emails, rich and deep user data, a huge affiliate marketplace, amazing SEO–one could go on and on.

You say, “Marketing via a direct-to-consumer approach means offering free resources, exclusive content, unique discounts, and special access to favorite authors. Do things that the retailer can’t do.” But most of the items in this list are things that Amazon either already does or could do.

I’m a long-time direct-to-consumer advocate, and have plowed that field for many years, so I certainly agree with you that one must “Give consumers a reason to enter into a direct relationship … that can be fostered for the long-term” but I’m not sure I agree with the list of means of doing it. What unique “value proposition” can a publisher–or anyone else-offer to consumers who already know they can easily buy from Amazon? There are good answers to this question but it depends on the publisher and specific affinities and interests of their potential customers. People buy things for many reasons–not just price and convenience; I know this from experience. And, I’m guessing you’d agree. The trick–if you want to go direct-to-consumer–is to find out what that “reason” is for you and your customer.

One last comment, or question really, is what do you mean by, “Notice I didn’t say direct-to-consumer “selling.” Selling books directly to readers is a different situation.” Do you mean you don’t advocate having publishers try to capture the sales themselves?

Thanks for your comment. Per your question, publishers would be unwise to conduct direct-to-consumer selling on a large scale until they first become adept at direct-to-consumer marketing. Otherwise, they will cut off the hand that feeds them (retailers) without a leg to stand on.